Ferrosilicon and Siliconmanganese enterprises reduce production
Affected by the "dual carbon" policy, this year the market as a whole is still phasing out the backward production capacity of ferroalloys, vigorously promoting green manufacturing, and ensuring the supply and price of bulk commodities such as coal.
Although the "dual carbon" policy still played a supporting role in ferroalloy prices at the beginning of this year. However, recently affected by the complex international situation, the number of mentions of the "dual carbon" policy has decreased. Ferroalloys are back in a highly competitive situation.
In recent months, ferroalloy manufacturers have taken the initiative to reduce and stop production due to low profits. my country's ferroalloy production is mainly concentrated in the west, and the four provinces of Qinghai, Ningxia, Inner Mongolia and Gansu account for about 60% of my country's ferrosilicon production. Electricity prices are cheap in these areas and production costs are low. There are a large number of ferroalloy enterprises, the production capacity of a single enterprise is small, and the industrial concentration is very low.
Since it is relatively simple to increase or decrease production of ferroalloys, manufacturers can quickly reduce and stop production when profits are thin. When profits rise, it can quickly increase production and resume production. This makes ferroalloy output more sensitive to profit.
In October 2021, when ferroalloys were most in short supply, the profit of manganese and silicon in the southern region once rose to 4,300 yuan/ton. However, with the increase in production and the decrease in downstream demand, the production of manganese and silicon gradually turned from profit to loss. By the end of June 2022, the profit of silicon manganese in the southern region has dropped to -460 yuan/ton. Profits of ferroalloy producers fell. Some factories with higher production costs have already started to lose money. Therefore, companies have chosen to reduce and stop production.
At the beginning of this year, the weekly operating rate of ferrosilicon was about 50%. Weekly operating rates fell to 39% at the end of July. The average daily output of ferrosilicon dropped from 18,000 tons to 13,000 tons. Ferroalloy output will remain low if profits are not significantly repaired.
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